1215

Which of the following statements is most correct under the Code and Standards?

A) Consent from the employer is necessary to permit independent practice that could result in compensation or other benefits in competition with the member's employer.

B) CFA Institute members are prohibited from undertaking independent practice in competition with their employer.

C) Members are prohibited from making arrangements or preparations to go into competitive business before terminating their relationship with their employer.

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Members are not prohibited from making arrangements or preparations to go into competitive business before terminating their relationship with their employer. CFA Institute members are not prohibited from undertaking independent practice in competition with their employer provided they have consent from their employer. Members must provide notification to their employer describing the types of services to be rendered, the expected duration, and compensation for the services.

1215

Jacob Allen, CFA, decides he could make more money if he started his own company. Which of the following steps would NOT violate Standard IV(A), Loyalty to Employer?

A) Taking home the employer's buy lists.

B) Getting written permission from his employer to call the clients and solicit their business for his new firm.

C) Taking home his current employer's client lists, investment statements and marketing presentations.

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If Jacob gets written permission from his employer to solicit their clients (not likely, obviously) he would not be violating the Loyalty to Employer Standard.

1215

When a CFA Institute member who is presently employed by a firm undertakes any independent practice, he must do all of the following EXCEPT:

A) remand a percentage (to be determined by the employee and employer) of the income earned back to the employer.

B) disclose the expected duration of the services to be rendered.

C) secure permission from the employer.

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The member is obligated to get permission from his employer if he will be in any way competing with his current employer. They must provide notification to their employer describing the types of services to be rendered, the expected duration, and compensation for the services.

1215

Jack Salyers, CFA, is considering starting his own firm to compete with his current employer. He takes several actions before turning in his resignation. Which of the following actions is NOT in violation of Standard IV(A), Loyalty to Employer?

A) Jack copied the employer's computer models and other property.

B) Before leaving, Jack solicits his employer's current clients.

C) Jack told his employer that he was considering leaving and requested that the employer write him a letter of recommendation.

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Asking for a letter of recommendation is perfectly acceptable. Soliciting clients and taking the employer’s property like client lists, computer programs, etc. are not permissible.

1215

A CFA Institute member, undertaking independent practice that could result in compensation or other benefit:

A) must notify his employer of the types of service to be rendered, the expected duration, and the expected compensation.

B) must notify the entities for whom he plans to undertake independent practice of the compensation he receives from his employer.

C) must notify his employer and clients of the types of service to be rendered and the expected compensation.

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According to Standard IV(A), Loyalty to Employer, a CFA Institute member, undertaking independent practice that could result in compensation or other benefit, must notify his employer of the types of service to be rendered, the expected duration, and the expected compensation.

1215

Analysts who undertake an independent consulting practice while employed must get permission from their employer and should disclose all of the following EXCEPT:

A) the clients contact information.

B) the anticipated duration of the service to be rendered.

C) the compensation or benefit to be received.

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The Member or Candidate is not required to disclose confidential information about his independent clients.

1215

Isabella Travelli, CFA, is a research analyst for Worldwide Investments in Rome, Italy. Travelli was contacted by Seaside Partners of Milan, Italy, a regional brokerage firm, about doing research on companies in the beverage industry on a contract basis.

Travelli may only do the contract work:

A) after receiving consent from both Worldwide and Seaside.

B) if Worldwide does not follow the beverage industry.

C) if Worldwide has no clients in the same geographic area as Seaside.

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Standards IV(A) and IV(B) require members to obtain written consent from both their employer and the contracting party before undertaking independent practice in competition with their employer. Travelli needs to seek such consent from both entities because it does not appear that she can argue successfully that there is no competition between Worldwide and Seaside. They apparently are both research firms, industry specialization may not prevent competition, and Travelli should be devoting her time and energy to her employment, unless her employer consents to the contract work.

1215

When providing outside services, a member should provide all of the following information to her current employer EXCEPT:

A) a promise to remit an agreed-upon percentage of the proceeds to the current employer.

B) the compensation she will receive.

C) the types of services to be provided.

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She should provide information about the type of services, the compensation arrangement and the expected duration of the project.

1215

Theresa Hatcher, CFA, is making arrangements to establish her own investment advisory business before terminating her relationship with her current employer, Elite Brokers, Inc. Elite is a small company consisting of only six investment professionals and a small support staff. According to CFA Institute Standards of Professional Conduct, which of the following activities is least likely a violation of Hatcher's duty to Elite?

A) Hatcher solicits Elite's clients before her termination of employment at Elite.

B) Hatcher engages in secret negotiations with two other investment professionals and her administrative assistant to leave Elite in order to join her new business.

C) Hatcher leases office space, furniture, and other equipment for her new business.

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Standard IV(A) permits Hatcher to make preparations to begin a new practice, such as leasing office space, furniture, and other equipment, but not to engage in the other activities that may violate her duty to employer.

1215

Which of the following statements is most correct concerning a member’s obligation to his or her employer under the Code and Standards?

A) Consent from the employer is necessary to permit independent practice that could result in compensation or other benefits in competition with the member's employer.

B) Members are prohibited from making arrangements or preparations to go into competitive business before terminating their relationship with their employer.

C) Members are prohibited from undertaking independent practice in competition with their employer.

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There is no blanket prohibition against independent practice in competition with a member’s employer. The member must obtain permission from the employer. Members may make preparations to go into a competitive business, but may not solicit clients of the employer as long as members are still employed by the employer.